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tv   World Business Today  CNN  October 5, 2011 4:00am-5:00am EDT

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and so i've learned to say, so do i. >> listen, i really appreciate you both coming on again. another lively debate. i hope we can do it again in six months. >> thank you. appreciate it very much. >> great being with you. >> thanks, victoria. that's it for tonight. that's all for us tonight. i'm zain verjee at cnn in london. here are the headlines this hour. russia and china vetoed a u.n. security council measure on syria on tuesday. the draft resolution would have called for a halt to syria's crack down on descent. they said it would have blindly pressured syria. u.s. ambassador susan rice says the countries that have blocked the resolution wanted to sell arms to the syrian regime. amanda knox is back in the u.s. she flew home a day after an
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italian jury overturned her murder conviction in the 2007 killing of her roommate, meredith kercher. she appeared at a news conference at seattle's airport, choked with emotion, she thanked her supporters. 17 people have been killed in an accident at a chinese coal mine. government officials say that they're investigating the cause. 11 of the 28 people in the mine shaft survived. few chinese mines adapt to regulations and accidents are common in the country. in the michael jackson involuntary manslaughter trial, prosecutors focused on three of murray's girlfriends. the married doctor had conversations with three women he was dating on the day jackson died. prosecutors are trying to use the women's calls and text messages to establish a time line leading up to the singer's death. those are the headlines from cnn, the world's news leader. i'm zain verjee, and "world
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business today" starts now. good morning from cnn london, i'm nina del santos. >> i'm andrew stevens. welcome. the top stories this wednesday, october the 5th. >> a rally on wall street keeps the u.s. out of bear market territory. shares sink in korea and japan while better than expected retail sales boost the aussie market. and european investors are in a buying mood despite a downgrade of italian debt. let's get straight to the european stock markets now. they've been trading for a touch over an hour. and investors appear to be shrugging off that italian downgrade by moody's late on tuesday. the ratings agency slashed the
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nation's credit ratings by three notches to a-2 and said it could cut further. but clearly it's not affecting the markets. they're following the markets stateside in yesterday's session. that is helping to lift european markets today when they start trading. one of europe's 20 largest banks and belgium's biggest, dexia, faces being broken up. it's supposed to isolate its assets. assets could be sold off or nationalized afterwards. it's a familiar story for dexia which was bailed out back in 2008. those two countries' finance ministries just yesterday said that they would take, quote, all necessary measures to protect the bank's customers. dexia's stock price has been plummeting about 22% yesterday
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in brussels. as you can see, though, this is how it's trading at the moment. it's bouncing back just slightly today in france, as you can see, up by about 4% at the moment. the governments of france and belgium are taking some steps to contain the crisis. it's still down by about 61% so far this year. the stock. and they've also written a comprehensive blog if you want to read up on that topic, you can access my blog at let's look at how this is affecting the currency markets. we had the eco meeting yesterday of the euro zone finance ministers. the euro's actually down by about one-fifth of 1% against the u.s. dollar, and that's thanks to talk to the european central bank will be implementing a fresh set of stimulus measures to boost the struggling economies.
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the dollar is also up against the british pound. it has lost ground, though, against the japanese yen. when it comes to the yen, that currency is strengthening again, 76.64 is where we are at the moment. andrew. a mixed day here on the markets in asia. hong kong and shanghai closed today for the national holiday which did skew things somewhat. in fact, the shanghai composite is shut until next monday because there is a golden week holiday here. so that was the picture. still trading in india, but that's the picture of how it looked today, mainly down. the biggest loser, 2% for the second day running. the nikkei reversing earlier gains. both those indices down amid the renewed concerns about europe's sovereign debt issues. that's after italy's credit rating was downgraded by three notches to a-2 by moody's. as i said, the sensex in mumbai still trading at this hour, down just a fraction. and the main aussie benchmark
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gaining almost 1.5%. resource stocks getting a boost as commodity prices rose. it wasn't just the resource stocks getting a boost, though. the much hit retail showing signs of life. it does show that australians are opening up their wallets just a little more than expected. retail sales up by more than forecast in august to .6%. it matches the earlier month and comes off june where you saw a contraction in retail spending here. well ahead of analysts' expectations, this latest number. they're expecting it to rise 0.2%. the rise came as australians spent more on household goods as well as eating and drinking out. nina. let's move over to wall street and have a look at how things fared on tuesday's session, andrew. it ended with u.s. stocks staging a strong recovery in the final hour of trading. reacting to encouraging news coming out of europe. the dow jones industrial average closed up nearly 153 points.
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that is equivalent to nearly a 1.5% rise. the nasdaq rose by 69 points, nearly 3%. and the broader s&p 500 index up 2.25% higher at the end of trading. u.s. markets look set for losses when the trading day begins later on today. this is where the futures stand. the premarket actions shows us that we could be poised for a decline for most of those markets. just the nasdaq composite futures that are virtually flat at the moment. i guess that's hardly surprising considering that one of the biggest economies in europe has just been downgraded by moody's and you've got a bank which is on the wreck at the moment. perhaps just a one-hit wonder for investors in the u.s. now, on tuesday, the fed reserve chief, ben bernanke, offered a pretty grim assessment of both the u.s. and global economy, saying the recovery is close to faltering, quote. but there are actually some
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economic forecasters out there who say that a double-dip recession is not inevitable. cnn's aerin burnett asked tim geithner if he thinks that might be the correct assessment. >> i think it depends really on two things, first on how affected the europeans are in dealing with their financial crisis. because that's putting a severe burden on growth around the world. and it's a very serious, grave crisis. so it depends on what they do in europe, but it also depends on our ability as congress to do something to make growth stronger in the united states. >> obviously there's been a lot of fighting today in congress about the jobs bill. republicans may be pushing it, knowing it would fail, eric cantor saying it won't pass. how much are you willing to give saying that the bill wasn't a political push by the president but a real effort to get something done? >> let me just say, it is very important that congress will do things that make the economy stronger now. we're very vulnerable to what's happening in europe.
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unemployment is still very high in the united states. and the overwhelming response we have is to do more now to strengthen the economy. we put on the table a very smart, very strong, very powerful package. people may have better ideas, but we have not seen a plan that would do nearly as much for the economy and be as effective as strengthening the economy and getting more americans back to work that has any chance of passing. >> tim geithner keeping the blame fairly and squarely on congress to get their act together to get the u.s. economy moving. it is, though, getting towards election season. nina. >> it is indeed. let's move to technology news, andrew. apple fans and much of the media worked themselves into a lather over rumors of an iphone 5 launch, but today it seemed as though they were underwhelmed as apple has said a souped-up version of last year's iphone 4. the 4s does have an enhanced camera, faster processor, also a
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voice interface, but it didn't impress investors on tuesday. in fact, apple's share price fell by nearly 5% after the unveiling before recovering to end the day slightly, though. that was albeit thanks to a rise in almost 3% in the nasdaq. so that last-minute rally we were talking about very much helping apple stock even if the unveiling of the iphone 4s didn't, andrew. there's a lot of talk in the analyst community about the performance of tim cook, the new ceo replacing steve jobs. a lot of people watching to see how he would fill those enormous boots of steve jobs. but, as you point out, investors not particularly impressed by the iphone 4s. neither was samsung. samsung confirming that it will ask the courts in italy and france to doctor the sale of the iphone 4s in those two countries. the company says apple has continued to, quote, free ride on our technology.
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the two firms are locked in a global battle. samsung claims the iphone 4s e uses two patents that belong to them. india is set to reveal what it's calling the world's cheapest computer. you're looking there at a stereo -- a prototype being displayed by india's human resources development minister. it's a tablet designed for students that runs on google's android platform. and the price, $35. pretty compelling stuff, nina. >> it is indeed. still to come on "world business today," the search for a woman duped into labor uncovers a chain of deceit. >> all the women say they can't leave until their debt to the agency is paid off. >> cnn's freedom project aims to put modern-day slavery out of business and the latest from this exclusive report from asia
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medicare guide and customized rate quote. live from hong kong and london, you're watching "world business today." now let's get back to things here in europe where it's a series of doom and gloom messages. moody's investors service has done nothing for the mood. not only did it downgrade italy's credit rating yesterday, but it also says that the euro area's debt pressure has yet to reach peak point. in a statement the ratings said that the weak market sentiment will likely persist for some time to come. one country under increasing pressure is spain. unemployment rose last month to more than 4.2 million people. that's equivalent to 21%. this means that this country has
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europe's highest jobless rate, largely caused by widespread unrest across the country. several protests and strikes. and in part, it's also due to the end of the summer holiday season. and the season, obviously, generates many jobs in spain. but the government's also been implementing some pretty swede widespread job cuts all part of tight austerity measures it has been introducing just like greece. in greece, austerity has made a severe recession worse. the jobless rate there stands at 16% by comparison. and speaking of people being out of work as a result of the economic downturn, well, a study has revealed that stress is actually the biggest cause of long-term sick leave across great britain. the institute of personal development says stress has now overtaken cancer and also musculoskeletal problem in the 12 years it's been publishing this survey. the institute says that increasing job security fears and growing workloads are all
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factors that are to blame as, of course, the labor market continues to deteriorate further. certainly no shortage of reasons to feel stressed at the moment not only in the uk but pretty much anywhere you look. let's look at the business stories making headlines in asia right now. australian federal police are investigating a series of addle death threats made to senior executives at the national airline qantas. media reports say that the ceo, allen joyce, was one of those targeted. the staff have reported damage to their cars as well as their homes. now, the reports come amid an ongoing industrial dispute between qantas and thousands of union workers. joyce says that bullying and intimidation are unacceptable in the workplace. now, turning to macau, casinos have enjoyed a bump, rising by some 39% in september compared with a year earlier. and that's despite a big fall on
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not only the hong kong stock market but also a big plunge in casino stocks themselves towards the end of the month. now, macau, as you probably know, overtook las vegas as the world's biggest gambling market. visitors pour into the territory during the national holiday which, of course, runs for a week. and a day after the new iphone launch, a copycat is trying to steal apple's thunder. china's official state news agency says five people have been arrested in shanghai for making and selling fake versions of the apple device. the iphonenys were made using discarded ipods along with other compone components. they were selling only a little less than the original. iphoneys. i love it. coming up on "world business
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today," billionaire investor warren buffett talking about the state of the u.s. economy. has his positive outlook been shaken at all by the recent downturn in global markets? we'll look into the crystal ball with the oracle of omaha. that's just ahead. ner with b vitamins, the first and only one to help support a healthy metabolism. three smart new ways to sweeten. same great taste. new splenda® essentials™.
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welcome back. all this week "world business today" is taking the lead in the cnn freedom project, our campaign to step stamp out modern-day slavery. it's the ugly side of business, but between 10 million and 30 million victims worldwide, we're covering everything from human trafficking and sex slavery to how consumers are complicit in the global slave trade. and we aim to open your eyes to a huge but hidden crime. yesterday we brought you first series in series of exclusive reports from southeast asia. it's part of the world where slavery and bonded labor still remain. cameras went to cambodia to see how thousands of workers are being manipulated. at the heart of his investigation, a young woman trapped in bonded labor in malaysia while her mother struggles to bring her home. >> that's right. well, in today's report, dan's investigation takes him to malaysia to look for her. what he discovers there is a
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system that's skewed against the workers, former bonded labor that the authorities seem willing to ignore. >> reporter: our search for the victims of modern-day slavery took us to rural cambodia. there i met a mother who showed me a photo of one of her daughters we're calling chinari who is still trapped in a factory in malaysia, unable to return until she pays off her debt. we visited the agency in phnom penh before our departure was hastened. all right, we're going. it was time for us to go to the northern city of penang. this is the booming center of malaysia's high-tech industry. they built millions of computer hard drives around the world. this is the end of the night
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shift at one factory here in malays malaysia. you see all the buses are lining up to take hundreds of workers home after an exhausting 12-hour shift. the workers appear to be from all over asia including many cambodians. i suspect one of them is chinari, the young woman who i'm looking for. and through an intermediary, we finally track her down and make contact. >> purple. >> reporter: after a little persuasion, she agrees to meet us along with three coworkers, all worried if they're seen talking to us, they'll be punished. over breakfast, they tell me they were promised $250 a month by the agency in cambodia, but 50% of their wage has so far been deducted to cover agency fees. after other deductions, they say they only receive about $100 a month, barely enough to feed
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themselves. their passports have been confiscated by the agency, and they only have a foephotocopy. she tells us they already tried to escape once but were caught by police trying to cross into thailand without a passport, a sign of how desperate they are to go home. >> reporter: her friend says she's just 17 years old and claims she was given a passport by the agency with falsified information showing she was 21. it's illegal for under 18s to work here. all the women say they can't leave until their debt to the agency is paid off. the women work at this electronics factory, jcy, which makes computer hard drives for major international clients including western digital. but in fact, the women are
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subcontracted by another company. so legally, jcy is not responsible for them. so chanary and her friends were the first part of a complex chain, recruited by the agency but then employed by a middle man along with dozens of other workers at this factory which is owned and operated by jcy. we decide the best way to help the girls is to hand over their case to a local aid agency which specializes in helping migrant workers. >> okay. >> reporter: case worker robin fernandez says their situation is bleak. >> one of the reasons why this is happening is because of outsourcing. when you outsource, you're not responsible for your employee. so the company washes its hands for whatever responsibility this agency supplying the workers. >> reporter: in theories workers at factories like jcy are free
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to go whenever they want. in theory, their employers are legally obliged to land over their passports whenever the workers ask for them. but in practice, it is the employers who sign off the workers' exit visas. and without that signature, they can't leave the country, meaning they're stuck here. jcy refused to do an interview but told us most workers willingly give their passports to their respective agents for safekeeping and are able to obtain their passports at any time upon their request. the statement went on, "all workers in our plants have free access to our human resource department and our management to report any grievance they may have. we try to resolve all grievances in a fair and equitable manner. as far as we're concerned, workers are free to leave their employment in our company at any time." these women may not have a ball and chain around their feet, but they are saddled with a huge fee that they must pay off before
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they can leave. and what's amazing is that all this is legal in malaysia. meaning some people get stuck here for years working 12 hours a day, 7 days a week to pay off their debt. in the final part of our investigation, why is this allowed to continue in malaysia? slavery? >> you could say modern forms of slavery. >> reporter: and the computer accessories you use that are built with debt-understabonded . dan rivers, penang, cnn, malaysia.
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live from cnn london, i'm nina del santos. >> and i'm andrew stevens. welcome back. you're watching "world business today." let's take a look at how the european markets are faring at the moment. we've had a positive start to the day. investors shrugging off concerns about italy after moody's decided to bring it down three notches in terms of its credit rating. we should also mention that the banks are staging quite a bit of a recovery in europe. this is largely thanks to news that the european central bank will be moving to try and recapitalize the banking sector after dexia became the latest bank to perhaps need a second bailout according to experts. and as you can see, the cac 40 is leading the charge up, 2.25% largely thanks to paribas,
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staging quite a bit of a recovery in today's session. >> oh, yes, but you wonder whether it's just a bear market bounce going on there in europe at the moment. certainly it was much more of a mixed day here in asia. hong kong and shanghai both closed today for national holidays. we'll look at the markets that were open. the seoul kospi with the biggest loser, down 4% or so yesterday, down another 2% today. the nikkei also fell. it was up earlier on the back of those pretty strong u.s. performance on the dow and the s&p. but italy's credit rating downgrade plus the dexia rattling the markets here. and in australia, up by 1.4%, helped by stronger commodity prices, also helped by better than expected retail sales. on wall street, there was a bit of a late surge in afternoon action. and we saw stocks making quite a bit of a comeback by the end of trading on tuesday. that came after those reports i was talking about before that european finance ministers were
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focusing very closely on propping up struggling banks across the euro zone. the dow jones industrial average ending the day up 153 points, nearly 1.5% higher. the nasdaq rose by 69 points, that's nearly 3%. and we also had the s&p 500 edging up about 25 points to close about 2.25% higher. let's have a look at the futures because u.s. stock markets look set for losses when trading begins later on today. as you heard andrew saying before, perhaps the big question is is what we were seeing yesterday a bit of a bounce. the futures currently indicate that we could see the markets falling by about one-third when things get under way in about five hours from now on wall street. with the markets in the doldrums and the greek crisis still very much up in the air, volatility is the watch word right now. but one senior strategist says that there's no need for long-term investors to panic. >> we do have up days.
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it's not a one-way street. it's just very volatile. and i think that's what's hurting people the most. it's the uncertainty and the volatility which is catching people out. but long-term investors should not be panicking. panicking doesn't help anybody. you just need to take a strong and good, hard look at their investments and make sure that they're happy with the risks that they're taking. >> some reassuring words there from rbc capital markets here in london, andrew. >> yeah, certainly not for the faint-hearted. let's switch to one person who's often seen as a source of reassurance in these troubled times. billionaire investor warren buffett. at least when it comes to the state of the u.s. economy. so has his outlook been shaken at all by the economic turmoil that's engulfed europe and is hitting the u.s.? well, the berkshire hathaway boss talks to poppy harlow. sfw >> when you look at europe right now, many feel it's a perilous situation.
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you said that europe has not brought the u.s. economy down. how bad does it have to get where it truly impacts us? >> well, if they're situation gets somewhat chaotic over there -- >> it's not now? >> well, it's pretty close. when you have the bonds of major countries payable in the same currency yielding 300-plus basis points more than germany, that's something that was not contemplated, believe me, when the euro was established. and it's not something sustainable at all. so they have to come up with a different answer, and they have to come up with it soon. and it has to be pretty darn decisive. and the problem, of course, is you have 17 people -- or 17 countries, and it's hard to have europe speaking with one voice or acting with one strong action. >> we're feeling it here in the united states. today banks are selling off steeply. you've got steep declines from bank of america to morgan stanley. is this because investors can't
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short the european banks? is this something else? is this selloff in financials, is it justified? does it make sense to you? >> well, i think -- well, it makes sense. i'm not -- if i had a choice of buying or selling certain banks in the united states today, i'd be buying. i think people are very worried about the banking situation in europe. and europe is such -- i mean, it's a huge part of the world. and there is a lot of interconnectedness between banks although probably less than a year ago. so it's natural when you have fears about the financial world to particularly concentrate it on banks and investment banks. >> the oracle of omaha there sharing some of his wisdom. there's a sidebar to this which is warren buffett versus robert murdoch. "the wall street journal" has been critical of warren
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buffett's tax proposals. buffett has turned around and said i'll show you all my income tax statements if you show me yours, rupert. i was wondering if he got any comment back from the news corp. chairman. i suspect not. >> rather busy these days, rupert murdoch, one would have thought. austerity is one word on everyone's lips at the moment, and it's a word the british prime minister, david cameron, may utter once or twice later today. speaking at the conservative party's annual conference, he says he's likely to say later on today that the right one to turn to britain and bring the country back to prosperity. he's also likely to warn his country folk that it could be a long road to recovery. we'll be looking forward to cameron's words later today in manchester here in england, andrew. >> yeah, mr. cameron is pretty hopeful he can keep the lights on in britain, and that's more than can be said for some parts
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the golden week is living up to its name. there's been somewhat of a gold rush, this as shoppers look for a quick return on their money. the price of gold dropped significantly since last month, in fact, down about 16% during this period. this is what the yellow stuff will buy you at the moment. doesn't have the midas touch. $11.55, trading at $1,618 at the moment. welcome back. this is "world business today." staying in china, the authorities there are telling citizens to brace for more power cuts headed into this winter thanks to a severe drought. the cuts are the result of electricity shortages extending
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from the past string. we have a look at the impact on industry as well as society across the country. randy. >> yeah, andrew, the news of those blackouts actually comes from via online, and the drought has lasted since past june for some parts of the country especially china's southwest. it turns out it's the worst drought they're seeing in the past six years. for a better idea of what it's like, take a look at some of these pictures. this here is a picture from china's southwest on august 27th. you can just see how parched the soil is here on this farmland. this next one here is a higher view of that same farmer's field. you get a better look at the cracking earth. this one is from may 27 from eastern anhui province. you see chinese fisherman which are pumping water from the yangtze river. the financial losses are estimated at about $4.5 billion.
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44 million people have been affected so far by the shortage, and that's according to the ministry of civil affairs. the amount of water that's available for power generation has fallen a whopping 30% to 40% from this time last year. now, off the back of this drought, china will need to rely more on other sources of energy apart from water, of course. according to the international energy agency's latest statistics, china relied on hydroelectricity for just about 2% of its total energy. meantime, natural gas came in at 3%. renewable energies came in at about 10%. this includes stuff like nuclear power, wind and solar energy. but coal, that is still the most important energy source for china, generating 66% of the country's total energy. andrew. >> so if hydro only accounts for 2%, will there be much impact on industry because of these power shortages? >> it will because out of that
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percentage, hydro accounts for about 17%. so it will impact about -- what is that, about 20% or so from the big picture. one creative way the government could handle this problem, though, is by doing some interesting thing, by actually extending the chinese new year vacation. that usually falls in january or february. of course, that is midwinter. rural people and factory workers typically take a whole month off for that holiday which is also known as the spring festival. but on the opposite side during the summer months, we already saw a different strategy. back in june the government ordered some factories to suspend their operations or maybe even work at night. that's because fewer people use air conditioning then. one other issue along with the industrial aspect is that our beijing producer brought up, it's the issue of heating. most homes south of the yangtze river including shanghai aren't actually fitted out with central heating, so they have to rely on these little electrical heating units. no electricity means, of course,
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no heat. we're looking at both industrial as well as social impacts from this wintertime electricity shortage. andrew. >> remi, thanks very much for that. nina. well, andrew, china may be suffering from a drought, but southeast asia it seems has the opposite problem right now, heavy rains leading to floods. jennifer delgado is standing by to tell us all about this. largely the philippines and thailand, isn't it, jen? >> yeah, those are two areas, and we're also talking about vietnam and cambodia. that's really mostly due to monsoonal moisture as well as tropical weather. now, we want to update you, if you remember tropical depression nalgae. right now it's weakened 56 kph. let me step out of the way for you. you probably have a hard time picking out, all the over towards parts of vietnam. we can expect the typhoon warning center is going to end all warnings on that system. you see on the satellite imagery. but again, we're talking about areas have been dealing with
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heavy rainfall including parts of the philippines. you see right now they're getting a break from the heavier rainfall. let's go to images to show you what it looks like through parts of the philippines. you're looking at kids walking through flooded streets. thousands have been evacuated. this is all because of tropical weather that's been moving through. two tropical systems, typhoons, very strong ones, have left behind widespread flooding. areas haven't been able to dry out. we have more images coming out of parts of southeast asia. you can see these are coming out of bangkok, thailand. people also walking around in waist-deep water. this is the worst monsoon season for them. reportedly more than 200 people have died. i want to point out to you if you look through parts of areas including laos, cambodia, vietnam, still picking up moisture that continues to be in the forecast. but overall, we are going to see just a slight break in the heavier moisture as we go through the next couple of days. elsewhere across parts of europe, we're talking about
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remnants, if you remember from once hurricane ophelia, well, that is moving through. we're talking really a much weaker system, but that's going to be bringing gusty winds as well as periods of heavy rainfall through parts of the uk as well as through scandinavia. but elsewhere, lots of sunshine in the forecast. we're also talking about warm temperatures once again today. but those temperatures cooling down the uk as we head into thursday. and finally, leaving you with a story coming out of the u.s. and the u.s. state of arizona, this is after a large dust storm whipped up yesterday afternoon. and it caused a series of backups and pileups. in fact, it proved to be deadly. one person died and others had to be taken to the hospital. the problem is it developed so fast, nina, as winds were gusting up to about 65 miles per hour. about 45 kph. and it looks like once again that danger's going to be in place for thursday. and this is after a disturbance moved through. and it looks like once again on
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thursday, we could see these dust storms pop up really quickly through parts of arizona. >> pretty dramatic pictures there, jennifer delgado. >> i can't imagine driving through that and you can't see anything ahead of you. >> yeah, certainly can't imagine that. i've been in arizona before, and i do know that it is terrifying. okay, jennifer delgado, as always, good to see you. many thanks for that update. so coming up on "world business today," finding the right price point for beer. on our next installment of "the boss," we'll be looking at a brewer making sure that he can cover production costs without making demand for his product go flat. everything comes together. where there's magic. and you now understand what nature's been hiding. ♪ at dow we understand the difference between innovation and invention. invention is important. it's the beginning. it's the spark. but innovation is where we actually create value for dow,
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it's the hardest decision when costs rise, how long do you hold off before increasing your prices? it's a problem playing on the mind of beer maker steve hindi. he's seen prices soar from their lows in late 2009. so what does he have to do in terms of planning his brew? we're about to find out in today's edition of "the boss." >> reporter: previously on "the boss." >> good. thanks. >> thank you. >> reporter: bottling success. steve hindy combines public service with profitability. >> it's enabled us to get a lot of attention for the company. yes, we're doing good, but it's
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also good marketing for brooklyn brewery. >> reporter: it's crunch time at brooklyn brewery. and for its ceo, steve hindy, big decisions have to be made. >> so this is barley malt from germany. well, this has gone up, like, 30% next year. this is malt of wheat. also from germany. and this has gone up even steeper than the barley. >> reporter: this is what he faces. rising prices for the key ingredients that make brooklyn brewery's beers. >> well, i mean, this is really the meat of the beer, you know, the barley. beer is about blealancing the sweetness of the barley with the bitterness and aroma of the hops. >> reporter: steve always knew the price of barley and hops
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would rise but not at this alarming speed. back in april, rising costs were already front and center on steve's mind. telling richard quest that he was considering raising prices across his line of beers. >> either we absorb it or we raise the price. and right now i have to predict there are going to be price increases. >> reporter: as the boss, you are going to have to make that decision, aren't you? >> yes. >> reporter: when are you going to make it? >> hopefully as late as possible. >> reporter: now the time for decision-making has arrived. >> what's it look like for next year with the grain increases? >> our supplier's been telling us that they're kind of predicting a pretty ugly year for price increases, and it's coming true. >> reporter: steve knows he has to lift prices to protect margins. but raise them too much, and it may impact sales. too little, and he won't make a profit. so to help steve make this
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decision, he's meeting with two of brooklyn brewery's managers. >> you add all these things together, guys, we're looking at roughly a $3 million hit to our bottom line. because of increased costs. >> that's like, what, 8% of our revenue. >> yeah. >> yeah. >> it's a good chunk. >> so we're looking at -- we're looking at a price increase? >> mean, we're probably going to have to go up 5% to 7% just to break even on costs. >> you don't have to be specific, but -- >> reporter: steve is concerned that raising prices may crimp the thirst for his boutique beers. >> we don't want to kill the sales. i mean, we're up 30% plus. >> we're facing 32% right now. i think that's roughly where we're going to end up. and i'd hate to see that go to 5 next year because we let it go to our price increase.
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>> reporter: it's a fine balancing act, a decision that only the boss can make. >> if we can increase our price by $1 a case across all brands, we'd be able to meet the $3 million in extra costs we're going to have next year. >> reporter: for steve hindy, this decision comes at a crucial time for the brewery. it's in the miflt of a mamidst massive expansion plan. so losing customers now just isn't an option. >> we've never spent this much money on an expansion and faced this challenge at the same time. so it's a tricky moment for us. the increase is going to -- into effect january 1st. we'll know by spring if we hit our sales momentum. >> reporter: next week on "the boss" -- evaluating your success and failures. we're in macau with francis loy.
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and upscaling your business. sara curran tells us how she manages productivity during a crucial move. sploo we had >> we had it do it over the course of two weeks. we had to first move the staff and then all the product over. >> reporter: that's next week on "the boss." and we'll also say farewell for the moment. you've been watching "world business today." nina and i will be back with maggie lake later in the day, but good-bye for now.
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